e-insurance: threat or opportunity?

Proceedings of the International Conference on Risk Management

(ICRM17Dubai Conference) ISBN: 978-1-943579-09-9

Dubai, UAE. 27-28, May 2017. Paper ID: DRM754

1 www.globalbizresearch.org

E-Insurance: Threat or Opportunity?

Nima Nourollahi,

PhD in Management, Member of Board,

Asia Insurance Co, Iran.

Hosseinali B. Nasrabadi,

PhD Candidate, Faculty of Management,

University of Tehran, Tehran, Iran.

Masoud Badin,

Member of Board,

Asia Insurance Co, Iran.

Abstract

The implementation of internet and e-commerce in the insurance industry is inevitable,

however, there are always exaggerations or suspicions regarding the capabilities and real

impacts of technology. This study aimed to examine the impacts of e-commerce on the insurance

marketing mix. In order to achieve this purpose, a survey research has been conducted, the

sample of which included 245 insurance industry experts and 126 internet and e-commerce

experts. From this sample which has been selected randomly, 64 internet experts and 50

insurance experts participated in this study. The data collection tool was a researcher-made

questionnaire, the results of which have been analyzed through descriptive and inferential

techniques. The research findings revealed that the impact of e-commerce on insurance

marketing is factual and substantial, but the acquisition process is estimated to be gentle.

___________________________________________________________________________

Key Words: electronic insurance (e-insurance), electronic commerce (e-commerce),

marketing mix





1. Introduction

One of the features of communication era is the multi-directional and close relationships

between people. Nowadays, the ease of access, growth in customer knowledge and trade

liberalization and privatization, resulted in the achievement of the theoretical concept of perfect

competition market which its prerequisites are awareness and the customer’s knowledge of

market and prices and the presence of multiple suppliers (competition). Sanaei (2002) believes

that marketing perspectives in the early twentieth which were focusing on the benefits of mass

production and maximum sales, have changed to the postmodernist perspectives, which are

satisfying customer needs and desire of the client and not only customer need and subsequently,

the power is transferred from the manufacturer and seller to the buyer. After the implementation

of Article 44 of the constitution policy within 6 years in Iran, the number of insurance

companies of 4, amounted to 32 state companies (Syndicate insurers’ website, 1392). The

departure of insurance industry from the state monopoly, has increased bargaining power of

insurers. For example, the insurance companies that were reluctant to accept drivers’ third party

insurance due to the high risk factor, now are seeking customers by fierce competition and

providing facilities (amortizations of premiums).

In a nutshell, the insurance companies have faced strong competitive pressures

accompanied by changing tastes and expectations of customers and have a critical need to

develop and market penetration, reduce costs, increase product quality and build strong

relationships with customers. The challenges that researchers believe e-commerce has the

ability to respond to them (Lynch, 2000).

However, in order to implement this technology effectively, a number of essential and

critical factors need to be considered. First, with the advent of any new technology, there are

exaggerations and suspicions about the capabilities of the technology in action (Coltman,

Devinney, Latukefu & Midgley, 2001); therefore, due to the need for major investments and

changes in business processes, at first, it is required to get adequate and realistic understanding

of technology applications in practice. Second, electronic and internet commerce, as a double-

edged sword, provide both countless opportunities and threats. Bill Gates interprets the

emergence of the internet as “the birth of the horrible beauty” which represents the inherent

opportunities and threats in this technology (Lynch, 2000). Third, mere implementation of a

technology for the success of a company is not sufficient. The costs of technical equipment is

only a part of the costs payable by insurance companies in Iran; therefore, consolidating supply

chain processes and integrating the internal and external business processes, awareness,

persuasion and culture are among the most important parts of work. As the e-commerce expert,

Dr. Dadashzadeh states, the use of internet technology and e-commerce, needs its own delicate

and special management (Tadbir Weekly, 1999). The short history of e-commerce is full of





unsuccessful attempts of companies to implement effective and efficient e-commerce. Finally,

the Forth point is that the successful application of this technology is also dependent on the type

and nature of the products, characteristics of customers and company’s trademark.

Insurance services, including financial services, are knowledge-based and dependent on the

flow of information and based on the type of the product and in a different extent, possess a

high potential to be submitted electronically. Although, insurance companies, in the case of

innovative technologies applications, are several steps behind other industries like banking and

stock exchange, the use of this technology is inevitable. Thus, it is needed to look at this topic

with a strategic insight and get necessary understanding of opportunities and threats of this

technology. This accurate knowledge in preparing marketing strategies, offers a comprehensive

view to the managers toward quality, quantity and the way to use this technology.

Therefore, the purpose of this study is to examine the impact of internet-based e-commerce

on the elements of insurance marketing mix, including the six elements of the product, tariffs,

promotion, place (distribution channels), people and processes; until the possible extend,

provides a clear idea about the impact of e-commerce technology on the insurance industry

marketing for the marketing managers of insurance companies. In order to have more authentic

data and not get caught in the trap of exaggeration or suspicions, two sample populations were

employed; including e-commerce expert and professionals of the insurance industry.

Comparing the ideas of the two groups of experts will offer a realistic view of the capabilities

of electronic insurance.

2. The Theoretical Framework

This section outlines the main concepts of this research i.e., e-commerce, e-insurance,

marketing mix and their theoretical framework on which the current study rests. Then,

considering the distinct nature of the products and the insurance industry, insurance and

insurance marketing mix will be discussed and the appropriateness of insurance services for e-

insurance will be examined. The final section will be dedicated to the impact of internet-based

e-commerce on insurance marketing mix. Also, facts and hyperboles surrounding e-commerce

and electronic insurance will be explored. In fact, the final section of the research literature

clarifies the goals, philosophy and necessity of this study and offers a clear idea to the marketing

managers of insurance companies about the capabilities, challenges, functions and practical

expectations of this technology.

3. The Concepts of E-commerce and Electronic Insurance

Today, every business enterprise is in two different worlds; one in the physical world and

another in the virtual world. Physical world sources are tangible for managers, while the virtual

world comprises of the intangible components. Some definitions, have relegated internet to

computer networks connected to the contracts and client-server protocols. But Krol and





Hoffman have looked at internet from the perspective of available benefits and opportunities

through this technology and as an extender of people communication (Krol & Hoffman, 1993).

In the council of Europe, e-commerce is a form of financial transaction that instead of physical

transactions, they interact electronically. It is a special form of electronic marketing e-

commerce which transfers supplier of services to the customers. A special form of electronic

marketing, is electronic retailing which includes the interaction between the participants and

the final consumer (Hurst, 2001). In general, e-commerce includes any kind of economic and

trade activities such as purchase/sale, transmission, exchange of goods, services or information

which is supplemented by electronic connections. When the topic of e-commerce is expressed,

mostly internet-based e-commerce is desired.

The use of e-commerce technology in the insurance industry, is the origin of the word

“electronic insurance.” In fact, the general definition of electronic insurance is the use of

internet and information technology for the design, production and distribution of insurance

services and its particular meaning is providing insurance coverage in insurance policies in a

way through which all the requests, proposals, contracts, insurance delivery and evaluation and

compensation process and negotiations between the insurer and the insured are done online

(Meshkat and et al., 2012). Also, they have defined electronic insurance as including the

development and applications of information infrastructures and preparation, implementation

and delivery of policies, rules and regulations for the entrance of insurance industry to the

information society and digital era (Hiwarkar and Khot, 2013 cited in Hatami, 2008).

4. Insurance and Insurance Services Marketing Mix

Experts consider a product having the potential to be presented electronically when the

shopping decision is based on rational criteria and simple, clear and understood buying

processes and the product has the potential for simplification and standardization. Meanwhile,

the process of thinking and the feeling before shopping should be done and that’s because of

previous pleasant experience and customer dependence on the product (Sanaei, 2002). Also,

Yarahmadi, considers compulsory purchase of the product (third party insurance for vehicles),

the low price and the products which their selling processes are more dependent on customer

attraction policies rather than force, as suitable for submitting electronically (Meshkat el al.,

2012). Therefore, the following parts will scrutinize insurance products and insurance

marketing mix of products in order to examine the position of insurance products in relation to

the ability to be presented electronically and to be scrutinized, which is due to the distinction

between marketing mix of insurance products and the ones of other products.

Article 1 of Iran’s insurance law, describes insurance as a contract by which one party (the

insured) makes commitment to pay funds (premium) and the other party (the insurer) makes

commitment to compensate any damage, with the occurrence of any event or accident. What is





insured is called the subject of insurance (Insurance code, 1976). Among the most celebrated

of insurance we can point to accident insurance, fire, transportation, automotive, engineering

and life (Karimi, 1997). As the definition suggests, insurance is a subcategory of financial

services and insurance companies are financial market actors. Karimi, considers special

features of insurance products as including invisibility, inseparability, variability, durability,

impermeability. Irons and Green, describe insurance products as having transient

characteristics, relationship with customer, mortality, customization and influencing customer

(Irons & Green, 1991). Although, in general insurance products have a good fit to be presented

electronically, the suitability is different for a variety of insurance products. It means, property

and liability insurances such as civil liability for drivers, house insurance, car insurance, travel

and individual events have more capacity than life insurance and pensions to be submitted

electronically and more interesting for insurers for online shopping. This difference in different

fields of insurance, will cause a gap in business models of life insurances with property and

liability insurances. For example, property and liability insurers, progressively, move toward

selling their insurance products on the internet; but most of the life insurers, have focused on

training through the websites and guiding customers toward the company’s agencies

(Rakovska, 2001). Also in another study, marine and aviation insurance, car, life and fire seem

to have greater proportion to be submitted electronically and on the other hand, engineering and

liability insurance are estimated to have less potential to be submitted electronically (Arabi &

Bromideh, 2006).

5. Insurance Services Marketing Mix

Many researchers have emphasized the necessity of a proper and efficient electronic

retailing marketing strategy for successful online presence (Eklandh, 1999). But in order to

become competitive in a new business environment, having one strategy is not enough and a

framework is essential for the implementation of this strategy. In fact, this framework is a

marketing plan and marketing mix is its necessary implementation tool. Marketing plan

includes the company’s mission, to clarify marketing goals, analyzing environmental

opportunities and threats and internal strengths and weaknesses (situation analyses),

development of marketing strategies (target market plan), developing appropriate activities

(marketing mix) to satisfy the needs of the target market and in later stages, implementation

and evaluation of marketing strategy (David, 1989). Roosta et.al, considered service marketing

mix as including seven elements of product, price, distribution, promotion, employees, physical

facilities and operations management and Irons and Green, also added the elements of people

(employees and customers) and process (Irons and Green, 1991).

The research literature, includes an extensive discussion on the impact of e-commerce and

internet on the insurance marketing mix. The impact of this technology on the element of

insurance products is defined as customization and adaptation of products to the needs and





customer orientation due to the customer initiative and creativity, the necessity and possibility

for the product distinction and these are due to the increase of marketing research and the

probability of customer familiarity and planning. In other words, product development and

going beyond price, as the first measure of competition in electronic retailing, is pivotal and

natural (Eklundh, 1999). In the case of the second element (tariffs), the increase of competition

on tariffs is very serious. Since in internet-based environment, the possibility for receiving

higher costs, without any increase in value added is not possible for customers. The reason for

this issue, is price transparency and customer knowledge and the probability of comparison

between products and tariffs and suppliers of goods simultaneously (Bromideh, 2012).

Internet creates an interactive learning with the change in marketing communications and

the possibility of peer to peer marketing. Each interaction, provides some elements for the

company, such as opportunity to study the information and knowledge needs, desires and

behavior patterns associated with customer purchasing process (Ko, Cho, & Robert, 2009). The

element of place would change in the electronic environment. Internet, as a distribution channel,

can be considered as a serious rival for intermediaries and insurance brokers. The insurance

companies, through direct selling of their products and intermediaries removal, will save a lot

of fees paid to them (Meshkat, et al., 2012). However, due to the complexity of product (life

insurance and pensions, industrial risks insurance) and need for consultation prior to the

contract, still the need for intermediaries is tangible. Anyway, changes in the role of

intermediaries toward insurance technical consulting firms, in order to optimize customer

purchasing and consulting claims, are highly possible (Grace, Klein, & Straub, 1998). Today,

insurance companies, mostly look at internet as another channel parallel to the intermediaries

and traditional brokers and are cautious about the elimination of intermediaries (Heidari,

Behestani, & Bahadori, 2013).

The element of people (employees and customers) is also affected by this technology; more

customer interaction in the product design process, customer’s more share in marketing

communication compared to traditional insurance can be treated as initiative and more

creativity and reduction of physical reference. In the case of employees, changes in their roles

refers to the necessity for more training and acquiring technological skills, more creativity and

reduction of administrative hierarchy and the physical environment (due to the possibility of

telecommuting) and increasing the efficiency of employees. Since, due to the reduction of

customer referrals and their physical contact, management and employees would have more

time to focus on more value-added activities (Heidary, el al., 2013).

Certainly, any change in the foregoing elements of marketing mix, encompasses the

necessity for change in the production processes and provision of insurance products. Further

increases in market researches, increasing the understanding of the needs and customer

demands for market segmentation, facilitating customer services due to the access to storage





systems and data analyses, elimination of non-value added activities in the manufacturing

process and replacing it with efficient and effective operations, all are among the impacts of

internet-based e-commerce on the elements of processes (Grace et al., 1998). Meanwhile, for

success, internet should be integrated and cooperated with other marketing processes such as

remote marketing, direct marketing and chain processing (Sanaei, 2002).

In the following sections, we will discuss e-commerce and its applications in insurance

industry in the form of electronic insurance and to get clear understanding of the opportunities

and threats related to this technology through more understanding and adjustment of

experience.

6. Facts and Myths of Electronic Commerce

Around 2000, with high enthusiasm, e-commerce was regarded as revolutionary in business

and experts were talking about explosive growth and multi-trillion business of e-commerce.

Internet and e-commerce were the headlines of newspapers, television and other mass media

and many large and small investors were convinced that a great economic miracle was on the

way that will enhance the value of virtual companies as the size of internet bubble (Downes &

Mui, 1999). But in April 2000, the internet bubble bursted; stock for virtual companies reached

to the level before the peak of internet and after a while, experts and customers’ imagination of

internet, as the second symbol of economic revolution, turned into a deep cynicism and doubt

(Coltman et al., 2001). What is so obvious, is the issue that both the exaggeration of 90s and

cynicism after bursting of the internet bubble, are in no way true. Anyway, what we still see is

the rapid development and deployment of the internet by companies. For example, in one study,

20% of 400 companies which were surveyed, had done internet and e-commerce related

projects in their companies successfully (Davinney et al., 2001).

One of the most valuable experiences of the pioneers in facing technological change is that

there is difference between the theories of bias (what we say about technology) and the theory

in practice (how to use this technology in real world). An obvious example is the discussions

of the peak of internet growth and bursting of the bubble. The theory of bias toward the internet,

states that internet will change all forms of commerce, will put a great impact on the customer

market and will bring price reduction, ease of access (24/7) and finally, close and customized

relationship with the client (Argyris & Schon, 1978).

But in fact, despite the investments of million dollars, some companies are still hesitant to

find the best way to do business with traditional methods and the development of electronic

businesses. Part of this problem can be related to misunderstandings, inappropriate timing at

the entrance to the interaction with technology and lack of commitment to provide the necessary

resources. These problems, with respect to the uncertainties about the extent and distribution of

internet, escalate (Day & Shoemaker, 2001). For example, until 1998, eleven different models





of e-commerce were introduced and failed one after the other (Shapiro & Varian, 1998).

According to the interpretation of observers, managers have focused on information technology

in a way that have failed to apply the basic principles of trade. Now, companies are involved

with lack of understanding of the costs and sources of e-commerce, uncertainty about the

possibility of investment return, challenges associated with making the interfaces of customer

use, internet integration with existing information systems and aligning organizational structure

with new model.

The insurance industry, like other industries, is not without hyperbole and exaggerated

claims about the capabilities of the internet. In fact, there are signs of “dot-com’, since the

executive managers, instinctively, do not thrust internet-based claims and previews. However,

ignoring the realities and opportunities of network applications is a big mistake (Arabi &

Bromideh, 2006). The following, will focus on exaggerated statements (metaphor) in e-

commerce as general.

The first proposition is invalidity (death) of brands in the electronic spaces. Here, the logic

states, according to the cost reductions of distribution and advertising on the internet, insurers’

access to different companies has become easy and reduces price sensitivity, range of internet,

diversity of insurers and also customers’ awareness and fidelity of toward the brand and makes

the brand weaker than ever (Coltman et al., 2001). But in fact, due to the importance of brand

in marketing activities, companies have tried to strengthen their brand through large

investments and relating their brand with the quality of their distinct product (Sanaei, 2002). In

addition, business investigations, state that the brand plays an important role in customer online

shopping and customers in unreliable communication world, attract by well-known brand

names in order to simplify the selection of purchase process (Barwise, 1997).

The second proposition is the discussion of cost reductions (tariff); in the background of e-

commerce, competitions and pressures to reduce tariffs have been raised repeatedly. The logic

of this proposition is reducing administrative costs, managerial and insurance costs (including

broker fees) and intense competition on price with a central focus on insurance products. But

in fact, part of the savings is consumed for advertising and attracting customers in virtual

environment (Meshkat et al., 2012). although delivering appropriate product to a particular

customer has become cheaper, this is not a guarantee for cost reductions. The company can

allocate larger share to itself. Adam Smith, 17th century great economist, was worried about this

issue that members of a trade union rarely come together in joy and recreation in order to share

agreement and cooperation on the cost increase. This collusion is possible in cyberspace

(Coltman et al., 2001).

The third proposition is the deletion (death) of intermediaries (insurance agents and

brokers). The logic of this proposition is that with the ability to sell insurance directly to

policyholders, the possibility of eliminating intermediaries and huge savings can be achieved





through the fees paid. Therefore, the fact is that, firstly, we have a very small percentage of the

insurance business on a global scale which is under the definition of electronic insurance, while

insurance companies consider the elimination of intermediaries relatively challenging (Arabi

& Bromideh, 2006); secondly, still there is not any evidence of the successful removal of

intermediaries (Coltman et al., 2001); and thirdly, as noted above, there is no possibility for

some insurance products to be submitted electronically.

The forth proposition states that the size of company is not as important as traditional space

for success and competition in cyberspace. Ester Dyson, head of electronic frontier foundation,

states internet changes economy of scale toward the interest of company, in order to have

satisfactory competitive perspective ahead and as a result, will incur less pressure for

competition and taking advantage of economies of scale (Dyson, 1997). In rejecting this

proposition, there is a simple logic, as the network is larger, it is more interesting for users.

Portal companies markets such as yahoo, Intel hardware and software such as Microsoft, all are

examples which get more value through wider access. Furthermore, integration of inter-

organizational networks, demands governance mechanisms and encouragement of network

members which large companies have this lever.

Also, propositions such as to be number one is pivotal and the winner takes all the profits

have been proposed. However, in practice, there is no guarantee that the following companies

such as Amazon and E-bay, keep their position in competitive market, because the technology

itself, is not a source of sustainable competitive advantage. With the slightest negligence of

precursors, maybe the latent power awakens the follower core competencies. For example, it is

possible one follower company in insurance market, changes its strong economic name in order

to compete with the precursor in the electronic space (Coltman et al., 2001). For example, a

famous bank, with entrance to insurance market, can challenge market precursor in standard

products such as personal and car insurances.

Also, winning in e-commerce environment does not mean taking all the advantages, the

exaggerated logic “winner takes all the profits” means that the winner company, through putting

powerful network and improve access to comparative information, pushes other actors to the

margin; even those who have competence in their specialized areas. For several reasons, this

proposition is under question. First, most economic companies (such as insurance), consider

web as a complementary business activity, marketing and distribution channels; therefore, to

be winner in electronic environment does not mean to take more advantage and profit. Still, it

is possible that off-line companies, through traditional and strong relationship with insurers,

maintain their position in the physical environment and take advantage. However, conventional

economic environment has its own structure and competition law. Second, this hypothesis

which states “can web lead to more profit” still is not resolved. Of course, for those products

that customer’s dependence on the particular brand is low, to be excellence in the electronic





environment cannot lead to predominance in getting more profit. Although, this can be true for

those shopping events that their process of research and evaluation is more sensitive, harder

and more direct and customers are looking for finding the best product from suppliers. Third,

markets with distinct segments of customers and companies and with valuable off-line

capabilities, can guarantee profitability of a company. While, relating a high traffic insurance

site to profitability is ambiguous (Coltman et al., 2001). For example, many websites were not

successful in converting the site traffic into real online shopping. The Bimard Institute which

works in the context of web research, through a study found 67% of its customers that have

finished the process of online shopping, in the last minute of have been regreted (Lim, 2013).

Finally, In the case of what they proposed by e-commerce covers all types of insurance

services and trades as well and also, the turnover of electronic insurance until year “x” is greater

than traditional business of insurance, exaggerations were made (Arabi & Bromideh, 2006).

But here is the fact; first, low growth of internet use and e-commerce in insurance during the

past decade, puts the credibility of these previews under question. For example, in 2010, only

4% of auto and house insurance premiums in the United States, equivalent to 4.8 billion dollars,

were achieved from online sale. According to the estimates by Forster Research Institute, the

rate of growth for electronic insurance in the United States, until 2015, would be 11% annual

growth and insurance sell (through digital channels) as 6% of the total insurance premium over

14 billion (Carney et al., 2011). Also, process reengineering, strategic vision, competencies

related to technology and management capabilities in e-commerce, all are among the

requirements of electronic insurance; sum of these elements are problematic and sometimes are

accompanied by some resistance from the inside of insurance company (Re, 2000).

In short, understanding the functionality of internet business (including insurance

companies), is fluctuating between two different views of skepticism and optimism. Although

the first group accepts e-commerce has a great impact on many aspects of businesses and

demands new requirements from its managers, they believe the underlying laws are not

changed. Therefore, they do not believe the term e-commerce [or e-commerce in insurance]

and believe, in fact, this is commerce that some of its activities are done electronically (Shapiro

& Varian, 1998). On the other hand, researchers believe traditional laws of commerce cannot

account for complex, uncertain and business environment changing circumstances of the third

millennium and a sea change is on the way. Booz-Allen and Hamilton believe internet is not

only limited to business and commerce, the fact is, this media will have a great impact on

corporate strategy and on business models as well. Researches indicate internet is creating a

paradigm about the form and nature of the businesses, competition and customer services

(Booz-Allen & Hamilton, 1999).

In the next section, the research hypotheses are proposed and after explaining the

methodology, we will focus on data analyses and hypothesis testing. The research hypotheses





have been designed based on research literature, interviews with experts and rational design.

Then, they were given to the insurance and internet experts.

7. Research Hypotheses

Hypothesis 1: the application of e-commerce in the insurance industry improves the

features of insurance services.

Hypothesis 2: the application of e-commerce in the insurance industry reduces the

tariffs of insurance services.

Hypothesis 3: the application of e-commerce in the insurance industry increases the

effectiveness and efficiency of promotion policies of insurance services.

Hypothesis 4: the application of e-commerce in the insurance industry promotes the

distribution policies (the element of location) of insurance services.

Hypothesis 5: the application of e-commerce in the insurance industry will empower

employees and customers (the element of people) of insurance services.

Hypothesis 6: the application of e-commerce in the insurance industry causes the

effectiveness and efficiency of processes (the element of process) of insurance services.

Hypothesis 7: there is a significant difference between the attitudes of e-commerce and

insurance experts toward the impact of e-commerce on insurance marketing mix.

Hypothesis 8: the prioritization of respondents based on the effect of e-commerce on

each of insurance marketing mix elements is not equal.

8. Methodology

The research method in the present study is descriptive and of field type which was done

with the purpose of examining the views of internet and insurance industry experts on the

effects of internet-based electronic commerce on marketing mix of insurance services. The

sample population of this study consists of two parts: the first part consists of 245 master of

insurance industry with high experiences who have authorships in different fields of Iran’s

Insurance Research Center profile. The second part consists of the managers from 126 active

companies in the field of internet and e-commerce and members of e-commerce and internet

service providers. The sampling was random and finally 64 insurance experts and 50 internet

expert with the fulfillment of questionnaire participated in this study. The questionnaire was

made by the researcher which contained 8 questions about demographic features and tendency

to the internet. Also 70 questions with Likert format were designed in order to reject or approve

the research hypotheses. For each question, related to examining the impact of internet-based

e-commerce on specific element of insurance marketing mix, based on the research literature

and reference to the experts, several determining elements (component) were included in the

questionnaire. Table (A) contains components for each of the research questions.

Areas for each of the research questionsTableTTTTa





Research questions Research component

Characteristics of

insurance services

Quality of insurance services; product diversity; improve the

trademark; making distinction

Prices (tariffs and

premiums)

Competitive pressure to reduce tariffs; customer sensitivity to

tariffs; reduce costs; opportunity to find suitable investments; the

discounts granted to financial services; simplifying procedures and

financial processes

Promotion of insurance

services

Cost reductions and encourage promotion; marketing

communications; effectiveness of promotion channels; encourage

and promote the diversity of channels

Insurance distribution

channels

Diversity of distribution channels; the effectiveness of distribution

channels; the costs of distribution channels; the communication

between channels; mediators

People involved in

insurance services The employees of insurance companies; customers

Processes of offering

insurance services

Customer-centric processes; use of information system and support;

research and development projects; processes (workflows) to

provide insurance services

The reliability coefficient of the questionnaire was obtained through the use of Cronbach’s

coefficient, as 91% for the sample of insurance experts and 92% for the internet experts, at the

significance level of 0/01. Also, to assess the validity of the questionnaire, content validity was

used. For this reason, the questionnaire was designed with reference to the scientific literature

and theories related to the research questions and submitted to the professors and experts. After

the revision based on their comments, the questionnaire was approved in terms of content and

face validity. For data analyses, descriptive and inferential statistics and SPSS software were

used. Finally, to analyze the data, Kolmogorov-Smirnov (for the pretest, normal distribution of

scores from sample groups for administering the test for two independent groups, Chi-square

test, Friedman ANOVA and correlation) was used.

9. Data Analyses

To analyze the data, descriptive and inferential statistics were used. This section consisted

of examining and describing the results of the questionnaires for each research hypothesis,

answering the main research questions and finally, comparison and classification of the impact

of e-commerce on insurance marketing mix, and all are related to the secondary research

question. Before performing statistical tests, it is necessary to investigate the normal

distribution of scores of sample population. Therefore, at the beginning and according to the

table below, the Kolmogorov-Smirnov test was done for 6 main research questions.

Normal distribution test of sample group scores

Research

questions

number

(z) K- s - z

Significance

level





1

2

3

4

5

6

114

114

114

114

114

114

816/0

633/0

848/0

014/1

429/1

782/0

518/0

818/0

468/0

256/0

126/0

573/0

According to results of above table and non-significance of the Kolmogorov-Smirnov test,

the hypothesis that sample group or groups are normal is confirmed.

Hypothesis 1: The application of e-commerce in the insurance industry improves the

features of insurance services.

Table 1: Comparison of Sample Respondents’ Scores about the Impact of E-Commerce

Application on the Improvement of Insurance Services, By the Criterion Score

Sample test

Sample population

mean

x̅

Standard

deviation

S

t

univariate

Significance

level

P

Internet experts 97/3 1142/0 35/60 000/0

Insurance experts 89/3 361/0 72/19 000/0

Internet and

insurance experts 91/3 2102/0 7/46 000/0

H0: µ ≤ 3

H1: µ > 3

According to the data in table (1), the null hypothesis is rejected; because the observed (t)

(60/35, 19/72, 46/7), at the error level of 0/01, is larger than critical value of the table (2/35,

2/39, 2/39). As a result, based on the attitudes of internet and insurance experts and also the

total respondents, the application of e-commerce in the insurance industry, more than average

level, causes improvement in the features of insurance services.

Hypothesis 2: The application of e-commerce in the insurance industry reduces the

tariffs of insurance services. Table 2: Comparison of Sample Respondents’ Scores about the Impact of E-Commerce

Application on the Reduction of Insurance Tariffs, by the Criterion Score

Sample test

Sample population

mean

x̅

Standard

deviation

S

t

univariate

Significance

level

P



Insurance and

internet experts 99/3 2453/0 091/43 000/0

H0: µ ≤ 3

H1: µ > 3





According to the results of table (2), the null hypothesis is rejected; because the observed

(t) (59/27, 23/40, 43/09), at the error level of 0/01, is larger than the critical value of the table

(2/39, 2/39, 2/35). As a result, based on the attitudes of insurance and internet experts and also

the total respondents, the application of e-commerce in the insurance industry, more than

average level, causes reduction in the tariffs (cost) of insurance services.

Hypothesis 3: the application of e-commerce in the insurance industry increases the

effectiveness and efficiency of promotion policies of insurance services.


Application on the Improvement of Promotion, by the Criterion Score

sample test

sample population

mean

x̅

Standard

deviation

S

t

univariate

Significance

level

P



Internet and


H0: µ ≤ 3

H1: µ > 3

According to the results, the null hypothesis is rejected; because the observed (t) (50/86,

26/56, 49/53), at the error level of 0/01, is larger than the critical value of the table. As a results,

based on the attitudes of insurance and internet experts and also the total respondents, the

application of e-commerce in the insurance industry, more than the average level, will cause

improvement in the promotion of insurance services.

Hypothesis 4: the application of e-commerce in the insurance industry promotes the

distribution policies (the element of location) of insurance services.


Application on the Improvement of Distribution Channels, by the Criterion Score

sample test

sample population

Mean

x̅

Standard

deviation

S

t

univariate

Significance

level

P



Internet and


H0: µ ≤ 3

H1: µ > 3

According to the table (4), the null hypothesis is rejected; because the observed (t) (51/83,

30/75, 50/52), at the error level of 0/01, is larger than the critical value of the table (2/35, 2/39,

2/35). As a result, based on the attitudes of insurance and internet experts and also the total





respondents, the application of e-commerce in the insurance industry, more than the average

level, will improve the distribution channels of insurance services.

Hypothesis 5: the application of e-commerce in the insurance industry will empower

employees and customers (the element of people) of insurance services.


Application on the Improvement of People’s Attitudes, by the Criterion Score

sample test

sample population

mean

x̅

Standard

deviation

S

t

univariate

Significance

level

P



Internet and


H0: µ ≤ 3

H1: µ > 3



2/35). As a result, based on the attitudes of insurance and internet experts and also the total


level, will cause improvement in the attitudes and attention toward people related to insurance

services.

Hypothesis 6: the application of e-commerce in the insurance industry causes the

effectiveness and efficiency of processes (the element of process) of insurance services.


Application on the Improvement of Processes, by the Criterion Score

sample test

sample population

mean

x̅

Standard

deviation

S

t

univariate

Significance

level

P



Internet and

insurance experts

97/3 1737/0 550/59 000/0

H0: µ ≤ 3

H1: µ > 3



2/35). As a result, based on the views of insurance and internet experts and also the total


level, will cause improvement in the distribution processes of insurance services.





Hypothesis 7: there is a significant difference between the attitudes of e-commerce

and insurance experts toward the impact of e-commerce on insurance marketing mix.

Table 7: Comparison of Sample Respondents’ Scores (Insurance and Internet Experts)

about the Effect and Application of Internet and E-Commerce on Insurance Marketing Mix

hypothesis

Insurance

experts

Internet

experts F

Variance

homogeneity

test

(Levene)

t Significan

level P x̅ S x̅ S

Characteristics

of insurance

services

87/3 2544/0 97/3 1142/0 08/15 000/0 76/2 007/0

Costs (tariffs and

premium) 98/3 3109/0 00/4 1194/0 23/17 000/0 467/0 641/0

Promotion and

advertising 93/3 2430/0 03/4 1435/0 95/8 003/0 714/2 008/0

Distribution

channels 93/3 2403/0 03/4 1404/0 24/8 005/0 504/2 014/0

People

(employees and

customers)

70/3 4206/0 92/3 1550/0 98/27 000/0 792/3 000/0

Processes 93/3 2050/0 01/4 1073/0 40/23 000/0 814/2 006/0

According to the Leven-Test, the homogeneity hypothesis is rejected, therefore, t-test (no

assumption of variance homogeneity) is used. According to the above table, the observed (t)

for questions 1, 3, 5 and 6 is significant at the level of p≤0/01. Therefore, there is a significant

difference between the attitudes of insurance and internet experts, meaning internet experts

have considered the impact of e-commerce on insurance marketing mix, more than what was

proposed by insurance experts. In the case of the element 4 (the effectiveness of distribution

channels), the observed (t) is not significant at the level of p≤0/05. Accordingly, it is concluded

that internet experts have predicted the impact of e-commerce on distribution channels more

than what was proposed by insurance experts. Regarding the issue of insurance tariffs, the

observed (t) is not significant at the level of p≤0/05. Therefore, there is no significant difference

between the attitudes of the two groups with regard to the impact of internet use on tariff

reductions.

Hypothesis 8: the prioritization of respondents based on the effect of e-commerce on

each of insurance marketing mix elements is not equal.

Table 8: Comparison and Classification of the Attitudes of Internet Experts, Insurance

Experts and Total Experts

Insurance experts Internet experts Internet and insurance

experts

ranki

ng

Insurance

marketing

mix

Ranking

average

Insurance

marketing mix

Ranking

average

Marketing mix

insurance

Ranking

average





1 costs 09/4 Promotion and

advertising 84/3 costs 00/4

2 processes 05/4 Costs 82/3 Distribution

channels 83/3

3 Distribution

channels 80/3

Distribution

channels 78/3 processes 76/3

4

Promotion

and

advertising

55/3 processes 75/3 Promotion and

advertising 74/3

5

Characteristi

cs of

insurance

services

00/3

Characteristics

of insurance

services

28/3

Characteristics

of insurance

services

19/3

6 people 51/2 People 53/2 people 47/2

H0: the influence of e-commerce on insurance services marketing mix is equal.

H1: the influence of e-commerce on insurance services marketing mix is not equal.

1) χ 2(r) = 34/43) df = 5, Sig = 0/000)

2( χ 2(r) = 93/35) df = 5, Sig = 0/000)

3( χ 2(r) = 18/76) df = 5, Sig = 0/000)

According to the results on the above table, Freedman Test is significant at the level of

p≤0/01. Therefore, H0 is rejected; thus, respondents’ ranking regarding to the effects of

insurance marketing mix elements of e-commerce is not equal. According to insurance experts,

e-commerce and e-business experts in the insurance industry will have the least impact on the

element of people and product characteristics. Also, insurance experts among other experts

believe tariff reductions are the most important impact of e-insurance on insurance marketing

mix; but e-commerce experts consider the impact of this technology as the effectiveness of

promotion policies and then tariff reductions and finally change in distribution channels.

10. Discussion and Conclusion

According to the data analyses, all hypotheses of this study have been confirmed. This

means, both e-commerce and insurance experts have confirmed the impact of internet-based e-

commerce on six-elements of insurance marketing mix, more than the average level. In the case

of product element (promoting insurance services), experts believe electronic insurance can

bring high quality of services (e.g. offering products to suit customer needs and demands),

covering the insured risks in an effective way, technical advice during the process of product

sales and compensation, product variety, sensitivity and the opportunity to make appropriate

brand. Experts consider the impact of e-commerce on the quality of product and ease of access

to services as the most dominant one and on the other hand, estimate the less impact to be on

accurate assessment of damage. The reason for that is the need for physical presence of the

insured in the process of assessing the damage for negotiation and bargaining of other





organizations such as repair shops, hospitals, independent damage assessment institutions in

this process.

In the case of the cost element, with the advent of e-commerce technology, experts have

confirmed tariff reductions more strongly. The reasons for tariff reductions, based on the

attitudes of experts, are reduction of administrative costs, insurance (specially reducing

commissions paid to brokers and insurance agents) and management, buyers’ sensitivity price

due to the increase of awareness and access to premium rate of competitors, appropriate risk

assessment and choosing logical risk due to the decision information systems and finally, access

to bank records of policyholders. It should be noted that tariff reductions, on the one hand, are

an essential requirement for insurance companies (due to the competitive pressures and

customer awareness) and on the other hand, is a possibility through cost reductions.

In the case of the promotion element, the experts consider the impact of e-commerce to be

effective on making more efficient policies toward promotion and encouragement. The reason

can be customer interactive marketing communication, targeted communications, effectiveness

and variety of advertisements to attract new customers and on the other hand, keep the existing

customers. The highest percentage of experts’ approval at the high and very high levels is

related to the removal of spatial and temporal barriers of communication. On the other hand,

the lowest approval is related to the sense of customer interest in insurer-insured electronic

interaction. According to the data analyses, offering insurance products through the internet,

also affects the element of place (distribution channels) of insurance marketing mix, more than

the average level. According to the experts, the variety of distribution channels, change in the

role of traditional distribution network (especially insurance agents and brokers), increased

competition between distribution channels and the reduction of distribution costs are the

impacts of e-commerce application in insurance industry. Also, the highest change in the

element of place is related to the ease of access to insurance services and the least amount of

impact is related to the discussion of replacing internet with the traditional distribution channels

(agents and brokers); because in the present circumstances, there is no opportunity to replace

intermediaries with the internet and the electronic insurance, acts as a parallel distribution

channel with other distribution mechanisms. Although, as quoted in the literature, for the high

coverage cost insurances, the premium is impressive and in the case of optional insurances (e.g.

in contrast to compulsory cases such as drivers’ civil liability against third party individuals),

such as life and savings insurances, the electronic insurance is not an appropriate alternative to

intermediaries.

About the element of people (empowering employees and customers), the experts consider

the impact of this technology in insurance industry on employees, creativity, higher education,

participation in decision-making, inability of concentration and the necessity for change in the

policies of human sources, flexibility in working hours (possibility of teleworking), change in





the nature of job description from technical to process and finally, change in the climate and

organizational culture. In the case of customer, these changes involve the client in the process

of designing and delivering products, increase the creativity and knowledge of customer about

the product and power transition from insurer to insured. In the era of communication, in fact,

insurer is a person with knowledge, familiar with the product and has the bargaining power that

must be considered. At last and based on the views of experts, customer-driven design processes

and provide insurance services, flexibility, reengineering processes in order to integrate design

chain with product supply, increase the necessity and possibility of market research designs to

identify the needs and desires of target insurer are among the most important impacts of e-

commerce on the element of marketing mix processes.

In the case of the hypothesis 7, the data in the table (7) propose there is a significant

difference between the attitudes of internet and insurance experts on estimating the impact of

e-commerce on the elements of promotion, place and insurance marketing mix processes. But

in the case of the impact of this technology on tariff reductions of insurance services, there is

no significant difference between the attitudes of internet experts and insurance experts. This

favorable attitude of internet experts, compared to insurance experts, is due to their better

understanding of the capabilities of the internet and e-commerce. This statement is more

meaningful when based on the part of this study, we mention that a positive correlation between

the frequency (time duration) of internet usage and estimating the impact of this technology on

insurance marketing mix was obtained.

As a result, it can be concluded that the impacts of e-commerce on insurance industry are

not hyperbole and exaggeration within the scope of this study; on the other hand, is originated

from reality. In the absence of significant differences in the element of tariff reductions, it is

concluded that tariff reductions in a competitive environment and facing knowledgeable

customer of digital era, by keeping constant the remaining economic variables, are

indispensable.

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